Compulsory acquisition of agricultural land retains tax exemption despite negotiated compensation, where statutory conditions are otherwise satisfied.
Transfer of agricultural land at village Dindoli to a municipal corporation for a sewage treatment plant was treated as compulsory acquisition rather than a voluntary sale, because earlier Tribunal and jurisdictional High Court rulings on the same village lands had already held the acquisition under the town planning and municipal law framework to be compulsory in character. A negotiated settlement on the amount of compensation did not change the nature of the acquisition, as it affected only compensation and not the character of the transfer. On that basis, the consideration was held eligible for exemption under section 10(37) of the Income-tax Act, 1961, and the revenue's objection failed.
Issues: Whether the consideration received on transfer of agricultural land to the municipal corporation was a case of compulsory acquisition so as to qualify for exemption under section 10(37) of the Income-tax Act, 1961.
Analysis: The land at village Dindoli was transferred to the municipal corporation for a sewage treatment plant and the controversy was whether the transfer was a voluntary sale after negotiation or a compulsory acquisition. The matter was already covered by earlier Tribunal and jurisdictional High Court decisions on the same village lands, which held that the acquisition under the relevant town planning and municipal law framework was compulsory in character. The fact that the amount payable was settled through negotiation did not alter the nature of the acquisition, because the settlement related only to compensation and not to the character of the acquisition itself.
Conclusion: The receipt qualified for exemption under section 10(37) of the Income-tax Act, 1961, and the revenue's objection failed.
Ratio Decidendi: Where land is acquired compulsorily for a public purpose, a negotiated settlement on compensation does not convert the acquisition into a voluntary sale, and the resulting consideration remains eligible for exemption if the statutory conditions are otherwise satisfied.
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